Changes: choosing Time-of-Use or Tiered billing

The Ontario Energy Board recently announced Regulated Price PlanS (RPP) for the winter (November-April). New for this year is consumer choice: Time-Of-Use (TOU) pricing will remain the default option, but individuals can opt to switch to the tiered pricing structure that many will be familiar with from before they were forced onto TOU pricing. Some have asked my opinion on switching - which I'd given without thinking it worthy of blog post. Now that I've heard others opine I offer a blog post to defend my very simple advice - and comment on the choices in the context of cleaner energy policy.

If you use less than the level of usage set for the lower-price tier (1,000 kWh) you should switch to tiered rates.

That's it: no gathering up all your bills, getting your hourly usage by registering on the web with your local distribution company (LDC), and crunching the numbers.

Just switch.

Now for me rambling on to justify that one line if only to justify my simply statement while everybody else I hear is advising researching ...

Messages from July's Global Adjustment figures

Ontario's electricity system operator (IESO) released the final July global adjustment figures yesterday. July is the first month of new global adjustment "Peak Demand Factors" for participants in the Industrial Conservation Initiative (ICI), and therefore it's the month that gives an idea how severe the cost shifting from the Class A consumers participating in the ICI to the other consumers in Ontario (Class B).

"To B." - Ontario electricity rate designer.

Collectively class A consumers share of the global adjustment costs shrunk to 16.7% from 17.7%, which had shrunk from 19.2% the previous adjustment period. From July 2019 thru June 2020 the shrunk share for Class A meant $215 million more transferred to Class B consumers - or the taxpayer that subsidize them - and that will increase by about $150 million a year for the next 2 years due to the Ford government's decision to suspend the requirement to reduce consumption during peak periods during the current adjustment period.

Some good news from the global adjustment reporting is Class A consumption is continuing to recover since sharply dropping towards the end of March

Government manufactured high electricity demand should end the ICI

Each day from July 7th to 10th saw an IESO "Ontario Demand" peak higher than any day since July 2013, and July 6th saw the 7th highest peak since 2013's summer. The government had made some announcements that encouraged this month's higher peaks:

• On Saturday, May 30th, the government announced the suspension of time-of-use (TOU) electricity pricing, replacing it with a flat rate until the end of October, and,
• On the afternoon of Friday June 26th the government announced, "companies that participate in the Industrial Conservation Initiative (ICI) will not be required to reduce their electricity usage during peak hours"

The second of these announcements was the most impactful in spurring higher peak consumption, but a review of multiply pricing impacts, and our ability to measure them, will provide a perspective for controlling systemic costs.

Consequences of Ontario's Green Energy Act warn against creating green new deals as stimulus

As economic activity takes a seat way back from the driving priority of halting the spread of COVID-19, recession is looming, and proposals popping up for spending to spur recovery. People, particularly those in Ontario, should be informed on the actions to spur stimulus during the last big recession, for two big reasons. This post will concentrate on the first - which is the cost, and benefits, of the actions initiated by the Green Energy and Economy Act of 2009.  I'll tally up costs incurred due to the electricity procurement than followed, and note the impact on post recession Ontario in quickly noting how those costs have been getting paid - and then I'll conclude with the second reason people need to know this history and its current impacts.

The Green Energy and Green Economy Act (GEA) was introduced to the legislature early in 2009, and received Royal Assent 3 months later. It provided the basis for a contracting orgy that persisted until the fall of 2011 before slowing to occasional carnal encounters. The impetus of the "green energy" push was a waning economy, as described by Karen Howlett and Renata D'Aliesio in 2011:

[Ontario Premier Dalton] McGuinty began looking at where to place his strategic bets during the global economic recession in 2008, when manufacturing jobs were quickly vanishing in Ontario. He solicited many opinions, said a source close to the talks, and the jurisdiction that kept coming up was Germany.
Mr. McGuinty turned to David Suzuki, Canada's best-known environmentalist, to set up a meeting with the father of Germany's green energy revolution, Hermann Scheer, in June of that year. The German parliamentarian arrived in Mr. McGuinty's office in the Ontario Legislature with a blueprint for building a new economy from scratch.
The McGuinty government heeded the now-late Dr. Scheer's advice. George Smitherman, then the new energy minister, adopted the "feed-in tariff" model that Germany used to become the world's first major renewable energy economy, committing to pay above-market prices for green power.
Liberal MPPs learned about their government's push into green energy in the fall of 2008 during a caucus retreat at the Benmiller Inn in Goderich, where Mr. Smitherman talked about the potential to create 50,000 jobs...

Ontario's green energy procurement were far from Keynesian economics. Instead of government borrowing to invest in the infrastructure that would aid productivity and grow wealth in the future, the government avoided borrowing by attracting private capital by offering generous contract terms trusting its existing global adjustment mechanism would allow the costs to be paid by electricity ratepayers. My understanding of economic theory is deficit spending on infrastructure during bad times allows for productivity to jump when better times return - but the GEA's contracting avoided growing government debt in return for making electricity more expensive in better times.

The Government of Ontario is committed to fostering the growth of renewable energy projects, which use cleaner sources of energy, and to removing barriers to and promoting opportunities for renewable energy projects and to promoting a green economy.
...
The Government of Ontario is committed to promoting and expanding energy conservation by all Ontarians and to encouraging all Ontarians to use energy efficiently. -Preamble to Bill 150 2009

The obvious costs from the GEA period are due to contracts awarded under the feed-in-tariff (FIT) program and related Green Energy Investment Agreement (GEIA) - better known as the "Sumsung deal". Less well known are the Hydroelectric Contract initiative (HCI) and Hydroelectric Energy Supply Agreements (HESA). Another stated goal of the Green Energy was the promotion of a 'culture of conservation' - with 'energy efficiency' and 'demand management' prominent phrases being joyously bandied about in and about the legislation. I've pulled the figures for those contracts, and conservation spending, from my database of estimates:

Influence Peddling: lobbying in Ontario's electricity system

Prior to COVID-19 arriving here in Ontario, and paralyzing society, I'd read some papers dealing with the electricity system. These papers may seem a trivial topic today, but the last major economic shock saw the Green Energy Act successfully lobbied and implemented by people who'd been laying in wait for a crisis to manipulate.

_____

In a conversation on January 24, 2020, at an Ontario Energy Network Event, Terry Young, (IESO Vice President Policy, Engagement and Innovation) interviewed IESO President and CEO Peter Gregg.[1] The VP lobbed a question he figured the head of a storage company would ask if she could use the app for questioning, and the President and CEO responded with what a big area of focus the niche was for the IESO.

40 Days after the IESO’s leadership channeled questions for the head of NRStor Inc., with the President acknowledging even if storage wasn’t economic they’d figure out some tricks to make it so, Blackstone, “one of the world’s leading investment firms”, completed the acquisition of NRStor C&I L.P. The head of NRStor congratulated some financial firms on the sale, indicating it was likely the company was being shopped as the heads of the sole contractor of their products were having a conversation pumping their products.

Storage may be important.

Influence definitely is.

Blackstone would not be the first company deciding the way to get into the Ontario market/bonanza is through purchasing existing “stakeholders” - the industry’s preferred euphemism for insiders.

_____

Three documents I read this year (prior to the COVID-19 pandemic hitting the province) either target the IESO to form policies for the lobby’s technology, or suggest actions that fit into the IESO’s preferences (which are, unfortunately, often dictated by the Electricity Act):

• Replacing Pickering: March 2020 The Next Step in the GTA’s Clean Energy Transition
• Economic Analysis of a Proposed Hydroelectric Pumped Storage Project in Ontario
• Whitepaper on Wind Energy and the Ontario Market

With the likelihood governments will be looking to stimulate economies should we ever exit lock-down mode, and assuming they’ll forget the long-term damage done by the very stupid procurements done in Ontario following the financial crisis, it might be worthwhile to quickly review what’s being pitched.

_____

the IESO's continuing assault on consumers

The COVID-19 pandemic is affecting most aspects of life, and Ontario's electricity sector is not, and cannot be, exempt. It appears unseemly to discuss electricity hucksterism during a time of crisis, but hucksters came to the fore during the last big crisis (the financial one of 2008/09), so it would also be unwise to passively allow more heists.

A week ago I posted an article on Linkedin: A massive excess of electricity. I really can't say why I didn't post it here on the blog, but I will briefly discuss its origin. There were two announcements that I'd commented on in social media channels (Twitter and Facebook): the IESO noting a steep drop in demand and Ontario Power Generation (OPG) deferring the start of a refurbishment outage at a nuclear reactor. Upon double checking through version of the IESO's daily adequacy reports to confirm Darlington 3 was no longer being removed from service I discovered another nuclear outage has also been cancelled. Each of those things was unfortunate for consumers exposed to Class B electricity pricing in Ontario - and the taxpayers subsidizing the Regulated Price Plan consumers who once were - but combined I wrote the suddenly additional  3,350 MW of excess supply will lead to spectacularly high, record, commodity pricing.

Those things were, in my opinion, unfortunate. With social distancing the increase in personnel on sites required for outage work might not be feasible, and demand is low for reasons that can't be responsibly countered.

Yesterday the head of the I____ Electricity System Operator, (IESO),Peter Gregg wrote a message to, "our market participants," in which he explained the massive excess supply is deliberate:

One of the most important steps we’ve taken in recent weeks has been to work with market participants to minimize the number of generation facilities and transmission elements that are out of service. Although a certain amount of redundancy is essential at all times, this redundancy is especially valuable to provide the flexibility the system needs right now

I read something yesterday that reminded me of that old song: "Hey ho, hey ho, Peter Gregg has got to go."

Don't know it?
You haven't been paying attention.

COVID-19: data, information and opinion

I've been following reporting on the coronavirus COVID-19 both for specific personal reasons and out of the general interest in data-driven communication I've tried to practice on this site. Realizing the shelf life of this post is likely to be incredibly short, I thought I'd take some time to write down which media is proving useful to me in explaining the situation, some sources of data on the spread of the virus, and what actions I'd hope to see taken.

I am the spouse of a paramedic - which is among the professions most likely to contact the coronavirus. We are both past our half-century mark, and we're fortunate that all of our parents are alive. We can't visit them without being confident we don't have the virus. I've felt unwell, with mild systems that could fit this virus, or a number of other things: my wife's symtoms were bad enough that we were directed to drive over an hour (each way) for testing this weekend, not so bad they performed the testing, but bad enough she was to quarantine for 2 weeks.

I won't attempt to communicate how the virus operates (there is a video for that) - but the specifics aren't necessarily what is driving the actions of, in Ontario anyway, the past 8 days. One of the most-viewed pages ever on the Washington Post site explains exponential growth with a model of a fictitious virus spreading. The paper, using four scenarios to address the speed at which the virus spreads, is credited with making "'social distancing' easy to understand." From that post: "If the number of cases were to continue to double every three days, there would be about a hundred million cases in the United States by May." It doesn't mention that the number would grow to include the entire US population within 5 more days, but ...

Maybe the most impactful graphic of the growth in the impacts to Canadians is the graphic on number of confirmed cases from Our World in Data reporting, filtered to show only Canada:

Ontario Electricity Distributor data can be informative, but lacks consistency

I recently updated a database I'd created with annual data from the Ontario Energy Board (OEB) yearbooks of electricity distributors. Viewing my reporting driven by the updated data now with records from 2005 to 2018 data I was struck by a couple of things I felt worthy of comment, but in researching as I wrote this post I discovered the trends that looked particularly striking were exaggerated by data reporting changes. The discussion on trends may still be useful both in itself, and in setting up some closing comments on data reporting discipline.

The OEB yearbook data isn't strictly comparable to data developed by the Independent Electricity System Operator (IESO). But looking at trends the growing discrepancies in summer peak demand appears to be quite extraordinary. In this first graphic the total of the summer peak demands at all local distribution companies (LDC's) are shown against the peaks of the IESO's "Ontario Demand" (which is actually demand for supply generators on the IESO-connected grid). I've added a, "Revised LDC peak" which I calculated to attempt to make the data from the yearbooks from 2016-2018 comparable to previous yearbooks' data.

While all LDC's need not have peaks at the same time, the relationship between LDC peaks and IESO peaks has changed since 2005. Although the total of all distribution companies' summer peaks has reportedly been higher than the IESO's summer peak in each of the past 3 years, this is only due to Hydro One Inc. boosting its peak by including IESO wholesale consumers that receive their electricity through Hydro One's distribution network. I suppose there's a judgement call as to whether the report is on distribution networks or distribution consumers, but I don't suppose the judgement should change from one year to the next.

Changes in procurement and consumer demand management explain why the gap is narrowing (if not eliminated) in the reporting of peaks in the IESO's "Ontario Demand" data, and the distribution reporting.

Supply to local distribution companies is only one element of the system operator's "Ontario Demand," which also includes consumption at generators, transmission losses, and supplying large wholesale consumers. About 85% of the IESO's "Ontario Demand" is due to supplying LDC's.

Ontario's Legislated Terribly Energy Plans

"The law is an ass," Dickens wrote - anticipating the Electricity Act in Ontario.

In writing on how the IESO's stakeholder-infested processes are working to prevent costs from being controlled I stated:

There are external, legislated, and political reasons for the IESO’s focus on efficiency, which seem to corrupt all analysis coming from it.

As with the global adjustment debacle, the architect of the dysfunctional law is Dwight Duncan - although neither vehicle would likely exist in their current form if he had remained as minister of energy long enough to see the abuse of ratepayers his policies have facilitated.

Prior to 2005, the purposes of The Electricity Act were:

(a) to facilitate competition in the generation and sale of electricity and to facilitate a smooth transition to competition;
(b) to provide generators, retailers and consumers with non-discriminatory access to transmission and distribution systems in Ontario;
(c) to protect the interests of consumers with respect to prices and the reliability and quality of electricity service;
(d) to promote economic efficiency in the generation, transmission and distribution of electricity...

I've added some emphasis to illustrate changes in the stated purposes of the law that took effect in 2005 - changes which removed "facilitating competition" as the main purpose of the act and demoted other priorities behind requiring central planning, conservation, demand response, and the promotion of "cleaner energy":

a) to ensure the adequacy, safety, sustainability and reliability of electricity supply in Ontario through responsible planning and management of electricity resources, supply and demand;
(b) to encourage electricity conservation and the efficient use of electricity in a manner consistent with the policies of the Government of Ontario;
(c) to facilitate load management in a manner consistent with the policies of the Government of Ontario;
(d) to promote the use of cleaner energy sources and technologies, including alternative energy sources and renewable energy sources, in a manner consistent with the policies of the Government of Ontario;
(e) to provide generators, retailers and consumers with non-discriminatory access to transmission and distribution systems in Ontario;
(f) to protect the interests of consumers with respect to prices and the adequacy, reliability and quality of electricity service;
(g) to promote economic efficiency and sustainability in the generation, transmission, distribution and sale of electricity...

The stated purposes in the current version of the law are similar, although an "a.1" is added "to establish a mechanism for energy planning." This mechanism connects the IESO's planning outlook to long-term energy plans from a Ministry including energy.

The changes to the act made back in 2005 explain the IESO's lack of competency in operating a competitive market and related abandonment of the main cost savings promise from Ontario's last long-Term Energy Plan. Which brings me to putting the IESO's newest publication, the first Annual Planning Outlook, in the context of the current Electricity Act's "mechanism for energy planning."

Records for wind and solar output on same day fail to reduce Ontario emissions.

Friday February 21, 2020 saw 2 record hourly production records on the IESO-controlled grid (ICG):

• 426 megawatt-hours (MWh) from solar in hour 14 (1-2 pm) and,
• 4,393 MWh in hour from industrial wind in hour 19.

Including hydro, and embedded generation (not on the ICG), production from renewables could have climbed above 10,000 MW in hour 11 and stayed above that level until hour 23.

That's the good news.

The bad news is the system operator didn't reduce natural gas-fueled generation from noon to 9 pm despite its Hourly Ontario Energy Price (HOEP) remaining below the cost to fuel generation from gas.

For the 10 hours following the HOEP dropping to $0, gas generators produced an average of 1,655 MW. According to the IESO gas generation totaled 9.6 million MWh in 2019, or approximately 1,100 megawatts per hour. Yesterday, as records were being set for renewables, contracted supply being curtailed, electricity being exported below the cost of even the fuel for gas turbines, generation with natural gas was 50% higher than the average from 2019.

Which begs this question of the IESO: "What were you doing?"

The threat/promise of more electricity from natural gas in Ontario

A presentation during the planning period of the IESO’s recently released Annual Planning Outlook (APO) included this line:

“Over time, production from [Ontario’s gas-fueled generator fleet] could exceed the utilization levels expected from those facilities (generally 40-60% capacity factor for [combined-cycle gas turbines]).“

The low utilization of generators contracted on capacity terms is something I tried to report on when writing of Available low-cost electricity not utilized in Ontario. We have been very far from 40-60% capacity factors over the past decade, and a breakdown of cost should demonstrate why that’s relevant to controlling expenses.

An outlook against lower electricity costs

Can anything be done to reduce the costs of electricity in Ontario?

I get the question more frequently lately.The answer is “yes". Something, theoretically, could be done. 

In reviewing 2019’s electricity figures I estimated the average cost of procuring one megawatt-hour (MWh) of supply was $94, and showed how that became $126/MWh for most Ontario consumers. That is an indication there’s plenty of room to find savings, so much room that there’s a more important question than how to reduce costs.

It's also possible to prevent costs from falling. Having written on excess supply, cost shifting away from unimportant consumers to influential "stakeholders", high contract costs, and may other issues for nearly a decade, I'm not inspired to address the question of what could be done - the more interesting question I will address is, "What is being done to prevent costs from falling? 

The current government was elected on a platform that included the claim they’d, “Cut hydro rates by 12% for families, farmers, and small businesses.” Over their first year and a half in office there’s been little to inspire confidence they’re capable of delivering on that promise. A recently released provincial finance report noted the cost of electricity programs ballooning another $1.5 billion as they head towards $5.6 billion for 2019-20 (ending March 31). The hit on the provincial treasury is largely due to subsidies preventing consumers on regulated price plans (RPP) from seeing rates increase on their electricity bills.

The 12% cut in the Progressive Conservative’s platform was in addition to the [un]Fair Hydro Plan (FHP) of the previous Liberal government - which promised (and did) reduce bills 25% in the present by deferring costs to the future. I developed a great contempt for that plan, but I could also view it as an unpleasant distraction. The Liberal government did deliver a long term energy plan (LTEP) that promised cost controls through improving what is whimsically referred to as Ontario’s electricity market.

Market Renewal will ensure the province has appropriate sources of electricity at the lowest possible price. This initiative could save Ontarians up to $5.2 billion over a 10-year period. -Glenn Thibeault, Minister’s message introducing 2017 Long-Term Energy Plan, October 2017

The plan - the long-term energy plan - was to improve the market for consumers.

Then, the nominally Independent Electricity System Operator (IESO) consulted stakeholders/insiders. In 2 short years they’ve reduced potential savings to consumers - which might be considered costs to the IESO’s stakeholders/insiders- by over 80%.

The Market Renewal Program is an important piece of the equation for us. With the approval of the high-level designs of the energy work stream, and a business case that estimates we can achieve $800 million in net benefits over the first 10 years alone, we’ve built a very strong foundation for change. - Peter Gregg, IESO President and CEO, November 2019

A $4.4 billion drop in the promised decadal value of market renewal, in under 2 years, is only one way the IESO is maneuvering to prevent a reduction in spending on electricity supply in Ontario. Others include inflating demand forecasts, lowering performance expectations from existing generators, raising capacity reserve desires, and exaggerating the threat of rising emissions.

Ontario electricity demands - an appendix.

Last week Ontario's Independent Electricity System Operator (IESO) released its first Annual Planning Outlook (APO), which is pertinent to the next article I wanted to write. This isn't that article - it's an explanation of graphics I created for the article I want to write.

While the APO the first of the new thing, it's just the latest in a line of forecasts intended to guide electricity planning in the province. This graphic shows 5 previous forecasts, but I felt I should explain their origins, and note they may not be strictly comparable. "Demand" is, in Ontario, a word that is, by itself, not very definitive.

Review of Annual Ontario Electricity Data

It's that time of year. This will be the tenth time I've produced a post on year-end electricity data. In my first such post I quoted the IESO's release on data for 2010:

"The cost of power in 2010 was 6.52 cents per kilowatt hour (kWh), as compared to 6.22 cents/kWh in 2009. This cost includes the average weighted wholesale market price of 3.79 cents/kWh and the average Global Adjustment of 2.73 cents/kWh (preliminary)."

It's a little higher than that this year. A similar sentence for 2019:

The [class B] cost of power in 2019 was 12.63 cents per kilowatt hour (kWh), as compared to 11.51 cents/kWh in 2018. This cost includes the average weighted wholesale market price of 1.8 cents/kWh and the average Global Adjustment of 10.8 cents/kWh (preliminary).

The prices aren't strictly comparable for two reasons, but for most consumers the difference will still be significant.
The numbers are nominal, but there was little inflation in Ontario over the decade (approx. 18%, and 1.85% in 2019) so the real "cost of power increase" for most consumers was still 65% over the decade, and 7.8% last year, which means last year was worse than average!
The "class B" distinction is necessary as two - or three - distinct consumer classes were created over the past 10 years.

I'll look at three distinct areas of supply: the reported generation figures on the IESO-controlled grid (ICG), distributed generation, and curtailed generation (which is supply Ontarians will pay for but was not accepted onto the ICG). I'll look at costs by the fuel, or supply type, as the IESO reports for generation. I'll look at "the cost of power" by consumer groupings, and provide an average cost of power. Most of these figures are estimated, and even figures produced by the IESO will often differ from one another due to minor differences in the origin of the data.
I will not generally try to reconcile my estimates to figures reported by the IESO due to limiting my time - and not agreeing with the IESO on discrepancies I've found in the past. Please interpret numbers as illustrative, and not gospel. This should be particularly obvious for cost break-downs which are not available anywhere else: most contracts are private and rates are estimated as best I can. I will briefly discuss the IESO's monthly global adjustment component cost file, which is one place you could find some confidence in the quality of my estimates, and/or their accounting.

I'll try to maintain a focus on providing a basis for analyzing opportunities to reducing the cost of electricity in Ontario in preparation on a future post on impediments to cutting costs.

A first metric for those who see little opportunity for cost cuts:

The average price paid to a supplier for a single megawatt-hour (MWh) was less than $94 (or 9.4 cents per kilowatt-hour), 35% below the average rate paid by Class B ratepayers. 

Now for the many numbers needed to make that conclusion.

View these estimates with Google Sheets